Under what conditions are Aira Fitness franchisees or their owners prohibited from issuing or selling securities?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
If you are a corporation, limited liability company, partnership or similar entity, you and each of your Owners represents and warrants that your ownership is completely and accurately listed on the Summary Page and that you will provide us with updated ownership information so that at all times the ownership information is current, complete and accurate.
In addition, you represent and warrant that: (i) you are duly organized, in good standing and authorized to conduct business in your state of incorporation and the state
where the Aira Fitness Business is located; **(**ii) you will confine your activities, and your governing documents will at all times provide that your activities are confined, exclusively to operating the Aira Fitness Business or another Aira Fitness Business under a franchise agreement with us; (iii) all assets used in the operation of the Aira Fitness Business are owned or leased by you; and (iv) you have and will maintain stop transfer instructions on your records against the transfer of equity securities except in compliance with this Agreement and will only issue securities upon the face of which bear a legend, in a form satisfactory to us, which references the transfer restrictions imposed by this Agreement.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to Aira Fitness's 2025 Franchise Disclosure Document, if a franchisee is a corporation, limited liability company, partnership or similar entity, they must adhere to specific conditions regarding the issuance of securities. The franchisee must represent and warrant that they will maintain stop transfer instructions on their records to prevent the transfer of equity securities, except when in compliance with the franchise agreement. Additionally, any securities issued must bear a legend, in a form satisfactory to Aira Fitness, referencing the transfer restrictions imposed by the franchise agreement. This means that franchisees cannot freely issue or sell securities without adhering to these restrictions and obtaining approval from Aira Fitness.
This requirement ensures that Aira Fitness maintains control over the ownership and transfer of franchise interests. By mandating stop transfer instructions and specific legends on securities, Aira Fitness can prevent unauthorized transfers that could compromise the integrity of the franchise system. This protects the brand and other franchisees by ensuring that new owners meet the franchisor's qualifications and adhere to the franchise agreement's terms.
For a prospective Aira Fitness franchisee, this means that if they choose to operate their franchise through a corporate entity, they must be diligent in managing their equity securities. They need to work closely with Aira Fitness to ensure that all securities issued comply with the franchise agreement's requirements. Failure to do so could result in a breach of the agreement and potential legal consequences. Franchisees should consult with legal and financial advisors to fully understand these restrictions and ensure compliance.
This type of restriction is relatively common in franchising, as franchisors seek to maintain control over who becomes involved in their system. It is important for potential franchisees to carefully review the transfer provisions in the franchise agreement and understand the implications for their business structure and ownership.